Rising inventory of troubled homes could spark more foreclosures

By the usual historical markers, the Sacramento-area real estate market is stabilizing, a model for recovery nationally.

But a particular wild card hangs over this fledgling recovery in Sacramento, making it anything but certain or predictable. More than 20,000 troubled homes are growing into a massive "phantom" inventory that could potentially be unloaded onto an already fragile housing market.

According to distressed property tracker ForeclosureRadar.com, most of the 4,449 homes foreclosed the past four months in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties are not yet listed for sale. And now the Contra Costa County firm says an additional 17,792 homes in the six-county area – all in some stage of the foreclosure process – represent a potential new supply of bank repos for roughly the next six months.

As of mid-May about 12,000 of these capital region properties had received notices of default, the first foreclosure warnings issued after several missed payments.

About 5,800 are within a month of auctions on courthouse steps, a move that can be postponed. Most are likely to attract no bids at the courthouse, then revert back to lenders who typically list them in the real estate market as repos.

As the 2009 summer sales season begins with repos accounting for two-thirds of sales in Sacramento County, no one is certain whether nearly 18,000 new troubled homes will actually come onto the market. The numbers could be blunted by more-aggressive loan modifications or short sales in which lenders accept less than owed to avoid the higher costs of foreclosing. California also is launching a new 90-day foreclosure moratorium in June for lenders that don't work hard enough to help borrowers stay in their homes.